“Assuming that Mac shipments would have been flat year-over-year, these percentage increases imply that about 200,000 Windows users purchased Macs in both the second and third fiscal quarters,” he added.

Half a million switchers predicted

In November, Wolf estimated that “about 500,000 Windows using iPod owners would buy a Mac in 2005. With estimates showing the switch levels to be exceeding that estimate, he surmises Windows users are driven by additional factors, not just their positive relationship with their iPods.

“The most obvious reason is the virus epidemic that has invaded Windows PCs. Clearly, some Windows users bought Macs to escape it,” he says.

Attracting so many Windows converts itself sets a pattern for future increases in Mac sales. As the “installed base” of iPod-owning Windows users grows, the number who switch to Mac should also rise, he believes.

Significant Mac unit sales expected

Needham & Co. estimates show the installed base of iPod-owning Windows users increasing to 24.2 million by the end of 2005. This figure stood at 5.7 million in 2004.

“Assuming an 11 percent switching rate, our model has these users purchasing over 1.2 million Macs in calendar 2006, about 700,000 more than in 2005.”

This suggests Mac sales will increase about 15 percent, (650,000 units), the analyst said — and that’s a conservative prediction, Wolf explains.

The analyst expects Apple to sell 4.518 million Macs in its 2005 fiscal year, predicting sales growth to exceed 45 percent in Apple’s current quarter.

Intel impact imminent

As Apple chief financial officer Peter Oppenheimer explained last week, it’s possible that Apple’s announced move to Intel processors may cause some potential Mac buyers to delay their purchase until new machines ship

“We’ve kept our forecast on the light side because of the possible negative impact of Apple’s transition to Intel processors,” Wolf writes. “Some customers will undoubtedly wait for Intel Macs, pushing some sales from 2006 into 2007.”

“Such postponements merely represent a time shift in the purchasing,” he said, stressing that his predicted Mac sales increases will simply serve to drive sales in later quarters.

IPod sales to remain strong

Wolf sees no reason for iPod sales to weaken. In the run-up to Apple’s third quarter results announcement last week, many analysts had expected demand for Apple’s iPod to wane. This was not the case — 6.16 million iPods were sold — a new quarterly record.

Wolf believes iPod sales will continue to climb, saying: “The iPod’s sales momentum should continue as Apple increases the number of outlets carrying the product and HP rolls out the product through its distribution network.”

While he agrees that iPod sales growth rates will “moderate, going forward”, the analyst is highly optimistic that Apple will benefit from more Mac unit sales.

The risk that buyers may delay buying a new Mac until the Intel Macs ship is joined by two more, which Wolf has built-in to his predictions: “The trajectory of iPod sales could follow a lower path than we’re forecasting”, he warns, adding the the iPod halo effect may transpire to be, “weaker than we’re anticipating”.

Despite the risks, Wolf expressed confidence in the company: “We’re raising our 2005 earnings per share estimate from US$1.28 to $1.40. We’re also increasing our 2006 estimate from $1.60 to $1.65,” he said.

Wolf rates Apple stock as a “buy” with a $52 price target.

This story, "Analyst: 'iPod halo' helped foster converts" was originally published by
PCWorld.

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